Brexit and the free movement of goods: a bitter goodbye to Cassis?

The Brexit and the subsequent Trade and Cooperation Agreement (hereafter TCA) marked the beginning of the bumpy and unprecedented road of European disintegration. Fear about loss of sovereignty and regulatory control was the driving force behind the UK longstanding reluctance to further European integration and, eventually, its exit from the Union altogether. The Leave campaign deployed its “take back control” slogan and promised divestiture from EU institutions and policies. What does “taking back control” entail? Well, in essence, and although there is no consensus on what the referendum vote implied precisely, we may assume that it means that legislation and regulation affecting the UK should be enacted (or at least believed to be enacted) by the UK. In other words, Brexiteers wished to regain full regulatory autonomy and hoped that leaving the EU would achieve this result. Will this narrative be upheld in practice, though? This post offers some answers that the TCA provisions on trade in goods and technical standardisation may offer. In a nutshell, it shows that, when it comes to trade in goods, the UK, although it has regained the theoretical opportunity to depart from EU harmonising legislation and technical standards, has not only not gained back control de facto but it is, in fact, losing opportunities when it comes to technical standardisation and market access. 

Harmonisation, technical standardisation and mutual recognition in the internal market

The free movement of goods is a cornerstone of the EU internal market. When it comes to the circulation of goods, three regulatory paths have made it possible to create an EU market without internal frontiers. Firstly, some sectors have been fully harmonised at the EU level under the Old Approach in which case EU legislation foresees the specific and detailed requirements for the producing and marketing of goods in the whole internal market. Secondly, various sectors are dealt with through the so-called New Legislative Framework. Under this New Approach, EU secondary legislation only harmonises the essential requirements to penetrate the EU market, while their practical implementation is left to private standard-setters. Under this co-regulatory approach, the Commission issues a mandate to one of the official European private standard-setters, which are composed of national standard-setters such as the British Institute for Standardisation, to develop harmonised standards. Once the Commission cites these harmonised standards in the Official Journal of the EU, they grant presumption of conformity with EU law and market access to the goods that abide by it. Before being placed on the market, products falling within one of the New Legislative framework legislations, need to be certified with the CE marking which is a label indicating that a product complies with the health and safety requirements. Thirdly, non-harmonised sectors, i.e. not subject to common EU rules, still come under the scope of treaty provisions governing free movement, mutual recognition and the notification obligation under Directive (EU) 2015/1535. The principle of mutual recognition established in the landmark Cassis case (and formalised in Regulation (EU) 2019/515) requires that, even in the absence of harmonisation, member states have the obligation to allow goods that are legally marketed and produced in other member states to circulate on their market with the exception of certain selling arrangements.

Pre-Brexit, the UK was thus subject to (but also benefitted from) EU harmonising legislation, harmonised technical standards and it had to allow goods lawfully manufactured and marketed in other EU member states into its own market. What is the post-Brexit situation?

Impact of the Brexit on harmonisation, technical standardisation and mutual recognition

For all intents and purposes, the UK and the EU now constitute two distinct markets and do not share a customs union. Although a zero-tariff and quota zone for all goods that comply with the rule of origin has been agreed on, EU goods will have to undergo customs formalities and demonstrate compliance with “new” UK product regulations before being imported in the UK and vice versa. However, most of the EU harmonising legislation that existed before 30 December 2020, has in fact become so-called retained EU law (i.e. incorporated into national UK law) as provided by the European Union withdrawal Act 2018 (sections 2-4), at least when it comes to domestic law implementing former EU obligations as well as directly applicable EU legislation such as regulations.

Therefore, fully harmonising legislation (the Old Approach) which usually come under the form of regulations, has become EU retained law. Future amendments made by the EU to its pre-exit harmonising legislation will not be automatically considered as retained EU law. On its side, the UK has already implemented many amendments to retained EU law and it remains rather unclear whether and to what extent retained EU law can in fact be amended or for that matter, fully repealed.

When it comes to non-harmonised sectors and the principle of mutual recognition established in Cassis, EU case law is not binding on UK Courts after the exit. It is important to recall, however, that the principle of mutual recognition has been formalised in Regulation 2019/515 which forms part of retained EU law and is therefore still applicable, in theory.

Concerning the fate of the New Approach legislation and their corresponding European harmonised standards, it appears that the UK has also adopted a co-regulatory approach, in the same sectors, whereby the public actor designates private technical standards as granting conformity with UK products regulation as attested, for instance, by art. 18B of the  Construction Products Regulations 2019 incorporating Regulation (EU) No 305/2011. Furthermore, pieces of legislation in the UK which implemented one of the New Approach directives pre-Brexit also became retained EU law and should therefore not change substantively in the future. The Secretary of State of the UK now has the prerogative to designate UK technical standards for regulatory conformity purposes. At this point, almost all European harmonised standards, which are considered as forming part of EU law since the Elliot case, have become UK designated standards (or designated with minor restriction). For instance, all but two of the 446 European standards dealing with construction products have been designated as UK technical standards without restriction (i.e. strictly copy-pasted). The same trend is applicable to all 23 harmonised sectors falling under the New Approach. In relation to the certification and the marking of products circulated in Great Britain which previously fell under the scope of one of the New legislative Framework legislations, they will need to bear the UKCA marking which replaces the CE marking. However, products bearing the CE marking in the UK will still be accepted until the end of 2021 (or later in specific cases such as for medical devices for which 2023 is the deadline).

There is one important twist though: The British government has split the territory into two regulatory models: Great Britain and Northern Ireland. Since Northern Ireland continues to follow EU rules for placing manufactured goods on the market in 2021 and possibly beyond, European harmonisation legislation and technical standards remain relevant to place a product on its market. Goods circulated in or via Northern Ireland will have to be certified with the CE marking or a combination of the CE and the UK marking (UKNI) if UK bodies have been part of the conformity assessment process. The combined marking, however, does not ensure free circulation in the EU.

All in all, technical regulations and standards established pre-Brexit in harmonising legislation have, so far, remained essentially similar on both side of the Channel. However, the big change is that products will now be subject to customs formalities such as certification and undergo two regulatory compliance controls which inherently creates friction to merchandise flow. Remarkably and despite the insistence of the UK, the EU indeed did not wish to negotiate an agreement on the mutual recognition of product conformity assessment. Such an agreement would have allowed accredited bodies located in the EU to issue conformity assessment certifications which would be valid in the UK and vice versa, thereby reducing the burden on exporters. This is rather surprising considering that the EU has such agreements with third states with which it does not have a free trade agreement (for instance the US). Furthermore, the UK’s lengthy experience dealing with technical harmonisation within the EU entails that the conformity assessment, at least in these harmonised sectors, is likely to be very similar in substance - if not identical. In that regard, it is noteworthy that official statistics already show that UK exports to the EU fell by 40 % in January 2021 and imports from the EU to the UK fell by almost 30%. Official sources indicate that the circulation of goods in the first few months of 2021 has been very impacted both in terms of volume and time. Important delays and customs formalities appear to be the cause thereof. Furthermore, these disruptions might worsen since it has been reported that many firms increased their stock in the later part of 2020 in anticipation to the uncertainties brought about by the negotiations’ mishmash.

Regulatory cooperation mechanisms post-Brexit: the case of technical standardisation and its impact on technical regulations

While cross-border trade inherently became less “free” than before, not so much because of a change in substance of the technical regulations but rather as a result of the administrative burdens encountered at the border, the TCA provides for relatively far-reaching provisions to facilitate access to each other’s market. The TCA is an unprecedented agreement since it is the first time that trading partners enter into a deal to legally and economically disintegrate while still keeping amicable trading relations and a somewhat open market. It contains various regulatory cooperation mechanisms which have the effect to limit each party’s sovereignty for the sake of reducing trade barriers, from transparency provisions, impact assessment of future technical regulations to the obligation to base technical regulations on existing international standards. The EU and the UK indeed undertake to base all of their existing and future technical regulations on international technical standards developed by, inter alia, the ISO, the IEC and the Codex. Although, the EU and the UK are already subject to this obligation in the TBT and SPS agreements, it is reinforced and clarified in the TCA in the following ways. Firstly, specific standard-setters such as the ISO are explicitly mentioned. Secondly, the obligation applies dynamically and retroactively and, if a party does not use relevant international standards it shall, at the request of the other party, provide justification.  Finally, some provisions in the TCA go even further and directly require the implementation of specific technical standards. This is notably the case for financial standards, aviation security standards, motor vehicles standards, medicinal products standard, and wine products. In the annex on wine products for instance, parties mutually recognise certain laws, standards and regulations adopted by the other party as sufficient to provide an equivalent protection to their own. Furthermore, laws and regulations of one party that are in line with the International Organisation of Vine and Wine technical standards, are also automatically recognised as equivalent.

Final remarks

At a time where a group of MPs, the Taskforce on Innovation Growth and Regulatory Reform, is sending recommendations to the Prime Minister as to how the UK should embrace its long-lost regulatory freedom to reform its regulations (i.e. to finally be able to diverge from EU law), this blog post offers them the following -perhaps- disappointing reflection: it might not be as easy as they wish it would.

When it comes to pre-exit technical regulations, has the UK “gained back control”? Perhaps it is a question of perspective but, essentially, all the UK has done so far is to copy-paste all existing EU harmonising legislation and technical standards into its own, just with a different label. Furthermore, the UK is unlikely to repeal pre-exist legislation implementing EU law nor to largely diverge from future EU technical regulations and standards for the two following simple reasons. Firstly, the EU and the UK both value sharp health and safety standards with the view to offer a high level of consumer protection to their citizens. The EU is offering extremely high technical standards. It is therefore doubtful how the UK could largely depart from them without jeopardising the quality of its own regulations and standards. Secondly, the EU internal market is the biggest importing market for the UK and it would be highly burdensome for its own firms having to rely on two completely different sets of regulatory norms. Consequently, while the UK has regained the theoretical de jure opportunity to diverge from EU harmonising laws, de facto all the UK has been doing up to this point to is incorporate EU law into its own. Despite all this, UK companies are already paying the price of the newly created administrative burdens encountered at the border which are inherent to leaving the single market.

Furthermore, when it comes to future technical regulations and standards, the TCA limits the everyday policy-making of the UK because of the regulatory cooperation mechanisms it introduces or reinforces. Essentially, all trade agreements inexorably limit sovereign law-making, and the TCA is no exception. The freer the market between two trading blocs, the more regulatory entanglement will have to be undertaken to maintain trade relationships that globalisation has made inevitable. While it would be unrealistic to assume that the UK electorate meant to reject any type of limitation on the decision-making power of their country when ticking the ‘leave’ box, most of the voters - and naïvely so - probably did not imagine that UK regulatory autonomy would be impacted by the TCA to such an extent and especially not by private standard-setters.

Every time the UK will want to develop new technical regulations, it will have to base them on existing international technical standards developed by private bodies outside its reach. So, even if the UK wants to diverge from EU regulations, it can only do so within the margin granted by relevant international technical standards. Interestingly, when the BSI was still a traditional member with full voting right at European standard-setters, it could exercise an important influence over the ISO process thanks to the strong institutional ties which exist between the European and the international standard-setters. Ironically, the BSI has lost some of its grip on the process at the ISO level as a result of the exit while the UK’s obligation to base its regulations on ISO standards has been reinforced by the TCA. Thus, when it comes to technical product regulations, the UK might, in fact, have lost some control over its regulatory autonomy because of the exit. Finally, private standard-setters on each side of the Channel might decide on their own initiative to fully cooperate and mutually recognise each other’s standards. Since these technical standards sometimes grant presumption of conformity with the laws, this might have an indirect yet strong effect of regulatory alignment.

Perhaps it is time that public actors rearticulate the discussion on the loss of control in terms of private actors interfering with their regulatory autonomy, but this is a topic for another discussion.